Banking (Responsibility and Reform)

Steve Brine Excerpts

Tuesday 7th February 2012 Commons Chamber

[Margot James]

First, on the causes of why businesses are not seeking loans to invest, that has much more to do with the eurozone crisis and the global economy in general. For any company seeking to export, there is a general nervousness across the world—not just in the west, but in China and the far east. Secondly, I agree with the hon. Gentleman about banks losing a lot of skills over the past 10 to 20 years in managing their business customers, but I see signs of change. I visited Barclays in Birmingham a couple of months ago, and I sensed the real commitment, along with an upgrading of skills, that that bank—to name one—is making to its business customers.

[Steve Brine (Winchester) (Con)]

Will my hon. Friend give way?

[Margot James]

I will give way one more time and then I must make progress.

[Steve Brine]

I am listening carefully to my hon. Friend’s speech. Further to her discussion with the shadow Business Secretary, there are new entrants to the high street lending market, which I think, without name-checking them and giving them the publicity, will shake up the “Computer says no” culture. [Hon. Members: “Name them.”] Virgin Money is coming on to the high street, and it will shake up that culture. Sometimes we are in danger of talking about just the traditional high street banks and lenders, when there are new entrants coming into the market that will really shake things up and change things.

[Margot James]

I thank my hon. Friend for that excellent intervention. Indeed, I attended a Virgin-sponsored event last week at which its youth capital fund was launched, to try to get money available for young entrepreneurs as seed finance, so I very much agree with his point.

The Opposition want us to raise taxes—again—to fund a youth unemployment initiative, but I strongly object to the motion. We cannot do enough for youth unemployment—I agree with that. It is an absolute scourge in my constituency, so I am pleased about the new proposals we are seeing, with the youth contract getting £1 billion in funding, which will create 410,000 work opportunities for our young people. We are also seeing record numbers of apprenticeships across the country. I would therefore argue that the Government are doing all they can to support young people back into work, which I absolutely agree is a challenge facing us all.

I want to speak on behalf of taxpayer interests, because we all own a stake in two of our high street banks. I also want to talk a bit about the protection of our tax revenues, as well as employment in the financial services sector, because I fear that by raising yet another tax on bonuses—on employment, essentially—we are jeopardising that investment. The shadow Business Secretary is the acceptable face, perhaps, of the Opposition, but many other Opposition Members, including the shadow Chief Secretary, the hon. Member for Leeds West (Rachel Reeves), alighted on one individual—Stephen Hester—a couple of weeks ago, repeating the mantra that “It’s all about rewards for failure.” The record really ought to be set straight when it comes to RBS. She should not judge the performance of that company just on the share price, and she is peddling a half-truth when she does so. She should look at the repair of the company’s balance sheet and the extensive disposal programme undertaken by RBS, which is on track despite incredibly difficult market conditions. The capital ratios have been improved, with SME lending by the bank making up 40% of total bank SME lending, which is higher than its market share. This country and its taxpayers would be dealt a mighty blow if the chief executive, Stephen Hester, were to react to the terrible publicity that he has had to endure by leaving that taxpayer-owned bank. Who do the Opposition think would want to take his place, after all that has happened?

On the question of the bonus tax—I shall choose my words carefully—I feel that taxes are plenty high enough already. The Opposition are proposing to raise them even higher, however. On any employment income at the level of bank bonuses, the higher rate tax of 50% applies. With employers’ national insurance and a degree of personal national insurance on top of that, the effective tax rate on some of those bonuses is already more than 60%. Let us not forget, too, that under the Government’s proposals, everything in a state-owned bank bonus apart from £2,000 in cash has to be deferred and taken in shares. If the individual then sells their shares, that will incur capital gains tax at the increased rate of 28%.

I shall finish by issuing a warning to Members on both sides of the House. In the days of the last-but-one Labour Government, under whom I grew up in the 1970s, the top marginal rate of tax was 98%. Do the Opposition really want to take us back to those times, during which enterprise was absolutely stifled?